Useful economic life
The period over which an asset is expected to be economically useful to its owner.
Definition
The useful economic life of the underlying asset is used to determine the depreciation period for the right-of-use asset. Where the useful life of the underlying asset is shorter than the lease term, the ROU asset is depreciated over the useful life. Where the lease term is shorter, depreciation is over the lease term.
Why it matters
For long leases where the underlying asset will wear out before the lease ends, the depreciation period differs from the lease term. This must be assessed for each lease or asset class.
In AuditLease
AuditLease stores useful life per lease and uses it in the depreciation schedule calculation.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence — so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.